INDIA Law and Practice Contributed by: Nitin Sarin and Vistasp Irani, Sarin & Co
1. Aircraft and Engine Purchase and Sale 1.1 Sales Agreements 1.1.1 Taxes/Duties Payable Upon Execution of the Sales Agreement A sales agreement, if executed while the asset is in India, runs the risk of being levied with several taxes in India, such as goods and services tax and stamp duty. Where an original document (executed outside of India) is not stamped with the requisite stamp duty, it must be affixed with the requisite stamp duty within three months after it has been received in India. Cer - tain states also impose stamp duty on copies of sales agreements. 1.1.2 Enforceability Against Domestic Parties The enforceability of a sales agreement will not be affected by the language in which it is written. How - ever, if a sales agreement needs to be submitted to a court or a government entity, it is recommended to have it translated into English and notarised. Further - more, if a document is not properly stamped, courts in India have the power to detain the document and refuse to admit it into evidence unless and until it is properly stamped. 1.2 Transfer of Ownership 1.2.1 Transferring Title Under Indian law, if an offer by one party is accepted by another for consideration, such an act or series of acts shall constitute “transferring title”, and this holds for all installed parts, including an auxiliary power unit. Under the general applicability of Indian law, the sale of an ownership interest in an entity that owns an air - craft or engine shall be recognised as a sale of that entity only. 1.2.2 Sales Governed by English or New York Law There is no prohibition on bills of sale in relation to aircraft or engines being governed by any foreign law in India. A bill of sale should ideally note that a valid contract has been entered into – ie, that there has been an offer by the seller and acceptance by the purchaser, and that the seller has received consideration.
1.2.3 Enforceability Against Domestic Parties If a bill of sale is executed in any language other than English, it is recommended that a translated copy be provided for its proper enforcement. Notarisation is also recommended. 1.2.4 Registration, Filing and/or Consent From Government Entities Generally, a bill of sale is not required to be registered, filed or subject to any consent from any government entity. At the time of registration of an aircraft, the registration authority may require a notarised copy of the bill of sale. 1.2.5 Taxes/Duties Payable Upon Execution of a Bill of Sale Execution of a bill of sale or the consummation of the sale of the ownership interest may be taxed in India while an aircraft is located in India. Most such trans - actions are undertaken when the aircraft is flying over international waters or flying over or parked on the territory of another country. If validly executed, operating/wet/finance leases or leases concerning only engines or parts are permis - sible and will be recognised under the law of India. Wet and finance leases require specific approval of the regulatory authorities in advance of execution. 2.1.2 Application of Foreign Laws It is fairly common for a foreign law-governed lease to be recognised in India. A court shall apply such law as long as the parties’ rights deriving from such a lease are not opposed to public policy and are not in breach of Indian law. 2.1.3 Restrictions Concerning Payments in US Dollars India is an exchange-controlled country; therefore, any remittance of foreign exchange (including US dollars) requires the approval of the Reserve Bank of India (RBI) or any authority it prescribes. Most of these approvals have been delegated by the RBI to 2. Aircraft and Engine Leasing 2.1 Overview 2.1.1 Non-Permissible Leases
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